News

Nov 12, 2013

MEDIA- FINANCIAL TIMES

Indonesia in frame for cinema shake-up

They have led the way in shopping malls, private hospitals and luxury cemeteries and now Indonesia’s influential Riady family is making a pitch to shake up the tightly controlled cinema industry in southeast Asia’s biggest economy.

The family’s Lippo group is planning to open its first cinema next year and roll out hundreds more screens as it tries to break the stranglehold of Cinema 21, which gained a monopoly on Hollywood film distribution during the Suharto dictatorship.

Media executives say that while Cinema 21, which has nearly 600 of the country’s 700 screens, no longer has a legal monopoly, its tight grip on distribution has held back the industry.

Indonesia still has fewer screens than neighbouring Malaysia despite boasting a population almost 10 times as large at 250m people.

“The industry is poised to take-off,” Felix Ali Chendra, head of Lippo’s media and technology business, told the Financial Times.

“A rising consuming middle class that is thirsty for entertainment, increasing urbanisation and a thriving local movie industry are all positive drivers.”

Starting with a 12-screen multiplex in February, Lippo has ambitious plans to open up to 1,000 screens over the next five years as part of an as-yet-unnamed chain.

Cinema 21, which was founded in the 1980s by a cousin of Suharto and is now owned by Benny Suherman, the tycoon, is the anchor tenant in several Lippo malls. The Riady group also plans to take over these leases as they expire.

Although Indonesia’s media industry has been booming because of demand from a fast-growing middle class and a tech-savvy young population, the cinema industry has lagged behind, with annual box-office sales of about $250m.

Blitz Megaplex, backed by Quvat, the local private equity company, entered the market in 2006 but has struggled because of Cinema 21’s control ofdistribution, expensive rents and the high costs of building international-standard cinemas.

Most foreign entertainment groups have also been deterred by tight restrictions on international investment in the cinema industry although CJ, the Korean conglomerate, invested in Blitz this year.

Media executives say that the Riadys have the potential to transform the market. They have the political connections, the capital and the sites asIndonesia’s biggest owner of shopping malls, with more than 40 in operation and more planned.

“They are very astute property developers and they know the market but getting the right people to run the business will be key,” said Mike Wiluan, a leading Indonesian film executive whose Infinite Frameworks studios produces the Garfield Show cartoon.

“Content is being devoured at a very rapid rate in Indonesia, which shows that there is tremendous potential. The main issue is that Indonesia does not have enough screens right now.”

Mr Wiluan said that while taking on such a dominant player would be a challenge, even adding 100 new screens would also help boost the fledgling domestic movie industry, which scored its first international hit last year with The Raid, a martial arts film.

But while he welcomed the arrival of new cinema operators, he warned against a repetition of past turf wars, which saw the distribution of Hollywood movies cease in Indonesia in 2011 over a tax dispute.